UNITED STATES
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarterly Period Ended: JULY 31, 1995
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or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
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0-3255
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(Commission File Number)
JAYARK CORPORATION
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(Exact name of registrant as specified in its charter)
DELAWARE 13-1863419
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(State of incorporation) (I.R.S.Employer Identification No.)
POST OFFICE BOX 741528, HOUSTON, TEXAS 77274
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(Address of principal executive offices ) (Zip Code)
(713) 783-9184
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(Registrant's telephone number, including area code)
(Former name, former address and fiscal year, if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [X ] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:
Class Outstanding at July 31, 1995
------------------------------ ----------------------------
COMMON STOCK $0.30 PAR VALUE 7,978,799
Part I.
Item 1.
JAYARK CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheet
(Dollars Expressed In Thousands
Assets 7/31/95 4/30/95
Current Assets: (Unaudited)
Cash and Cash Equivalents $ 557 $ 1,177
Accounts & Other Receivables - Net 12,255 5,769
Federal Income Taxes Receivable 374 -
Inven 14,906 8,533
Deferred Federal Income Taxes 296 296
Other Current Assets 784 379
------- ------
Total Current Assets 29,172 16,154
Non Current Assets
Plant & Equipment - Net 1,028 988
Excess Cost Over Net Assets of
Businesses Acquired - Net 327 333
Deferred Federal Taxes 52 52
------ ------
Total Non Current Assets 1,407 1,373
Total Assets $30,579 $ 17,527
======== =======
Liabilities & Stockholders' Equity
Current Liabilities
Notes Payable & Lines of Credit $11,292 $ 5,545
Current Maturities of Long Term Debt 250 24
Trade Accounts Payable & Accruals 5,359 998
Accrued Liabilities 312 339
Other Current Liabilities 727 464
------ -----
Total Current Liabilities 17,940 7,370
Non Current Liabilities
Long Term Obligations 2,176 43
Subordinated Debentures 1,250 1,500
----- -----
Total Non Current Liabilities 3,426 1,543
------ -------
Total Liabilities 21,366 8,913
Stockholders' Equity
Common stock of $.30 par value.
Authorized 10,000,000
Shares; Issued and Outstanding
7,978,799 at July 31, 1995
and 6,978,799 at April 30, 1995 2,394 2,094
Additional paid-in capital 7,967 7,110
Retained Earnings (Deficit) (1,148) (590)
------ ------
Total Stockholders' Equity 9,213 8,614
Total Liabilities & Stockholder $30,579 $17,527
====== =======
See accompanying notes to consolidated financial statements
JAYARK CORPORATION AND SUBSIDIARIES
Condensed Consolidated Results of Operations
(Dollars Expressed in Thousands Expressed In Thousands)
(Unaudited)
Three Months Ended
7/31/95 7/31/95
Continuing Operations:
Net Revenues $ 12,644 $ 10,674
Costs & Expenses
Cost of Revenues 9,964 8,066
Selling, General and Administra 3,147 2,441
Interest 378 166
------ ------
Total Costs & Expenses 13,489 10,673
Pre Tax Earnings ------ -----
From Continuing Operations (845) 1
Provision For Income Taxes (287) -
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Income From Continuing Operation (558) 1
Discontinued Operations:
Income (Loss) From Discontinued Operations,
Net of Income Taxes - 8
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Net Income $ (558) $ 9
======== =======
Primary Earnings per Common Share:
Continuing Operations $ (0.07)$ -
Discontinued Operations $ - $ -
---------- ------
Net Income $ (0.07)$ -
========== ======
Weighted Average Common Shares:
Primary 7,858,721 6,614,079
========= =========
See accompanying notes to consolidated financial statements
JAYARK CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statement of Cash Flows
For The Three Month Periods Ending
(Dollars Expressed in Thousands)
(Unaudited)
7/31/95 7/31/94
Cash Flows From Operating Activities
Net Income From Continuing Operations $ (558) $ 1
Depreciation and Amortization 83 6
Changes In:
Accounts and Other Receivable (6,486) 55
Federal & State Income Taxes Receivable (374) -
Inventories (6,373) (706)
Other Current Assets (405) (100)
Notes Payable 5,747 (321)
Current Maturities of Long Term Obligations 226 (39)
Accounts Payable 4,361 (183)
Accrued Liabilities (27) 94
Federal & State Income Taxes Payable - (82)
Other Liabilities 263 109
--------- -----------
Net Cash Provided By (Used In) Operating (3,543) (1,166)
Net Income (Loss) From Discontinued Operation - 8
Cash Flows From Investing Activities
Capital Expenditures (117) 30
Purchase of subsidiary 1,157 -
Net Liabilities of Discontinued Operations - 399
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Net Cash Provided By (Used In) Investing 1,040 429
Cash Flows From Financing Activities
Long Term Obligations 1,883 37
Treasury Stock - (13)
----- ------
Net Cash Provided By (Used In) Financing 1,883 24
Net Increase (Decrease) in Cash (620) (705)
Cash & Equivalents at Beginning of Period 1,177 777
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Cash & Equivalents at End of Period $ 557 $ 72
========= ==========
See accompanying notes to condensed consolidated financial statements
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1.The condensed balance sheet of Jayark Corporation and subsidiaries (the
``Company''), as of July 31, 1995, and the related condensed statements of
operations and cash flows for the three months ended July 31, 1995 and 1994
are unaudited. The condensed consolidated balance sheet as of April 30, 1995
has been derived from audited financial statements. The condensed
consolidated financial statements should be read in conjunction with the
audited financial statements and footnotes for the years ended April 30, 1995
and 1994, included in the Company's report on Form 10-K, as filed with the
Securities and Exchange Commission.
2.The interim financial statements reflect all adjustments (consisting of only
normal and recurring accruals and adjustments) which are, in the opinion of
management, necessary to a fair statement of the results for the interim
periods presented. The Company's operating results for any particular interim
period may not be indicative of results for the full year.
3.The provision for income taxes is calculated using the estimated annual
effective Federal tax rate. The Company adopted Statement of Financial
Accounting Standard Number 109 (``SFAS 109'') effective May 1, 1993. SFAS 109
changes the criteria for the recognition and measurement of deferred tax
assets, including net operating loss carry forward.
4.During fiscal 1993, the Company sold substantially all operating assets and
discontinued operations of it's Printing & Graphics and Sportswear
subsidiaries.
5.Certain reclassifications have been made in the 1994 financial statements to
conform and be consistent with the presentation used in 1995.
6.On June 27, 1995, LCL International Traders, Inc., (``LCL'' or the `Seasonal
subsidiary''), a wholly-owned subsidiary of the Company, completed the
acquisition of substantially all the assets and business of a group of
affiliated companies engaged in the import and distribution of seasonal and
promotional merchandise. The sellers, located in Hong Kong and Central
Islip, New York, have operated under the trade names ``Liberty Bell
Christmas'', ``Ivy Mar'' ``Creative Home Products'' and ``Award
Manufacturing''. LCL acquired these trade names as part of the transaction.
Please refer to the Company's report on Form 8-K, dated June 27, 1995.
ITEM 2.
MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
THREE MONTHS ENDED JULY 31, 1995 AS COMPARED TO THREE MONTHS ENDED JULY 31, 1994
--------------------------------------------------------------------------------
NET REVENUES
Consolidated Revenues of $12,644,000 represents an increase of $1,970,000,
or 18.5%, as compared to the same period in 1994. The Audio Visual subsidiary's
revenues increased $29,000, or 1.0%, compared to last year. The Household
subsidiary's sales decreased $903,000, or 11.5%, as compared to the same period
last year, due to the very soft retail environment. The new Seasonal
subsidiary's sales for its initial reporting period were $2,844,000 .
COST OF REVENUES
Consolidated Cost of Revenues of $9,964,000 increased $1,898,000, or 23.5%,
as compared to the same period last year. The Audio Visual subsidiary's cost of
revenues increased $45,000, or 1.9%, associated with the increase in sales. The
cost of revenues for the Household subsidiary decreased $545,000, or 9.5%,
corresponding to the decrease in sales. The new Seasonal subsidiary's cost of
sales were $2,389,000 .
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Consolidated Expenses of $3,147,000 increased $706,000, or 28.9%, as
compared to the same period last year. The Audio Visual subsidiary decreased its
expenses by $24,000, or 6.4% as compared to the same period last year primarily
as a result of a organizational changes in the Advanced Video Technology
division. Household subsidiary expenses decreased $138,000 or 7.1%, reflecting
a reduction of resources allocated to administrative support functions as a
result of the reduced sales levels. Seasonal subsidiary expenses were $900,000
for the period. Corporate expenses decreased $32,000 or 27.6%, accounting for
the balance of the total increase in expenses.
INTEREST EXPENSE
Consolidated Interest Expense of $378,000 increased $166,000, or 127.7%,
due to increased levels of borrowings for both operating working capital and
acquisition of the Seasonal subsidiary.
PRE-TAX INCOME (LOSS)
Consolidated Pre-Tax Income(loss) (from continuing operations) of
($845,000) decreased $856,000, as compared to the same period last year. This
loss was realized primarily because of: i}start-up expenses of the new Seasonal
subsidiary, and ii) results of operations of the new Seasonal subsidiary during
the first fiscal quarter, historically the least profitable quarter for the
Seasonal subsidiary.
NET INCOME (LOSS)
Consolidated (Losses) of ($558,000) decreased $567,000,as compared the
same period last year due to the foregoing..
LIQUIDITY AND CAPITAL RESOURCES
The following table sets forth the ratio of consolidated current assets
divided by consolidated current liabilities of the Company at the dates
indicated:
Current Ratios
July 31, 1995 April 30, 1995
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1.63 2.19
In January of 1992, the Company renewed and extended a financing
arrangement with State Street Bank and Trust Company to make available a total
of $20,300,000 a combination of revolving lines of credit and term loans. The
term loans were repaid in January 1995. This financing arrangement was used to
consolidate existing financing, to pay for the Household subsidiary acquisition,
and to provide available working capital for continuing operations.
The arrangement with State Street Bank and Trust Company was amended in
March 1993, to make available a total of $16,325,000 in combination of revolving
lines of credit and term loans. The loan agreement was revised to reflect the
payoff of the revolving line and term loan associated with the sale of the
Printing & Graphics subsidiary.
The financing arrangement between State Street Bank & Trust and the Company, was
further amended in December 1993, to make available a total of $13,075,000
maximum in combination of revolving lines of credit and term loan. The loan
agreement was revised to reflect the recollateralization of certain
manufacturing assets of the Household subsidiary, as well as restructuring
certain portions of the Company debt from demand notes to revolving lines of
credit.
The current financing arrangement was further amended in December 1994: the
loan agreement was revised to reflect the renewal and extension of the maturity
dates of lines of credit to December 1995, to make available a total of
$13,000,000 maximum in revolving lines of credit, reduce the rate of interest
charged on the lines of credit, approve the repayment schedule of the Company's
subordinated convertible debentures, and reflect the payoff of the term loans.
Consolidated open lines of credit, available to the Audio Visual and
Household subsidiaries from their associated financing agreements, were
$1,083,000 on July 31, 1995, as compared to $3,355,000 the previous year. It is
management's opinion that operating expenses, as well as obligations coming due,
will be met by cash on hand, future cash flows from operations and available
lines of credit.
In June 1995, the Company's wholly-owned Seasonal subsidiary entered into a
factoring and related financing arrangement with The CIT Group/Commercial
Services, Inc. (``IT''), the Seasonal subsidiary's primary lender.
During August 1995, the Company, the Seasonal subsidiary and the Household
subsidiary, each a wholly-owned subsidiary of the Company, entered into a
Reimbursement Agreement with certain related third parties to provide to CIT,
the primary lender to the Seasonal subsidiary, irrevocable standby letters of
credit and cash in the aggregate amount of $1,700,000 to serve as additional
collateral against which CIT would lend additional working capital to Seasonal
subsidiary pursuant to CIT's lending arrangements with the Seasonal subsidiary.
The arrangement with CIT for the additional financing secured by the
additional collateral expires on February 28, 1996. On that date, in the event
that CIT shall have applied any of the additional collateral to the Seasonal
subsidiary's obligations to CIT, Seasonal subsidiary will reimburse the parties
for the collateral so applied by CIT, such reimbursement to be made in the
ordinary course of business or in the event the Seasonal subsidiary refinances
its indebtedness. Alternatively, the parties may at any time after February 28,
1996 receive shares of the Company's Common Stock as reimbursement for the
collateral applied by CIT to the Seasonal subsidiary's obligations by CIT. Each
party would receive that number of shares that has a value equal to the amount
of such party's collateral that is applied by CIT; for purposes of the
agreement, the Company's Common Stock will be deemed to have a value of $1.25
per share.
In consideration for providing the additional collateral, on February 28,
1996 the parties will receive a total approximately of 400,000 shares of Common
Stock of the Company in proportion to the amount of additional collateral
initially provided by them.
The Company's cash balance has decreased significantly due primarily to
reduction of debt, increased investment in inventories to support an anticipated
increase in sales typical during the second quarter of the fiscal year, and the
purchase of the Seasonal subsidiary. There are no material commitments planned
for capital expenditures as of the latest fiscal period, other than normal
retirements and replacements.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Not Applicable
ITEM 2. CHANGES IN SECURITIES.
Not Applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not Applicable
ITEM 4. SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS.
Not Applicable
ITEM 5. OTHER INFORMATION.
On June 27, 1995, LCL International Traders, Inc., a wholly owned
subsidiary of Jayark Corporation (the `Company''), completed the acquisition of
substantially all the assets and business of certain affiliated companies (the
``ellers''), engaged in the import and distribution of seasonal and promotional
merchandise.
The Company's Form 8-K dated June 27, 1995 reporting the event was filed in
a timely manner and stated that the required financial statements for the
acquired business were to be filed as an amendment to the June 27, 1995 Form 8-
K, as soon as practicable, but not later than September 11, 1995.
The Company received via facsimile transmission on September 7, 1995, a
copy of a letter to Lib-Com Ltd., the parent company within the group of
companies comprising the Sellers, from Coopers & Lybrand (the `Auditors''), the
Sellers auditors. This letter stated that: `the client-auditor relationship
between Lib-Com Ltd and Coopers & Lybrand L.L.P. has ceased.''The Company had
not previously been advised that the Auditors would not complete the audit of
the Sellers' financial statements and had planned to include such audited
financial statements in a timely amendment to the Company's June 27, 1995 Form
8-K. The Auditors have not advised the Company as to the reason for the
termination of the client-auditor relationship between the Auditors and Sellers.
Due to the Auditor's withdrawal, the audit of the most recent fiscal year
(1995) of the Sellers was not completed as scheduled. The Company is unable to
file the required 1995 audited financial statements at this time.
The Company is attempting to make immediate arrangements with other
auditors to determine the Company's ability to obtain an audit of the most
recent fiscal year (1995) of the Sellers.
In anticipation of a request by the Company to the Auditors to grant their
consent to include their previously issued report on the audited financial
statements of the Seller for the preceding two fiscal years (1994 and 1993), the
letter from the Auditors also stated that they would consider consenting to the
inclusion of their report on the audited financial statements of those years in
a filing to be supplied to the Securities Exchange Commission to be new
engagements and that they would be unlikely to accept such engagements.
Due to the Auditors, statements rejecting the inclusion of their report on
the Sellers' financial statements for the fiscal years 1994 and 1993, the
Company is unable to file the required audited financial statements of the
Seller for fiscals 1994 and 1993.
The Company is seeking to make immediate arrangements with other auditors
to determine the Company's ability to obtain an audit of the preceding two
fiscal years (994 and 1993), of the Sellers.
Due to the foregoing it is also impracticable for the Company to provide
the required pro forma financial information at this time. The Company cannot
prepare the required pro forma financial information until the underlying
audited financial statements are available; if and when such statements are
available, the pro forma financial information will be prepared as soon as
practicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibit 11. - Earnings per share computations.
(b) Reports on 8-K
Form 8-K dated June 27, 1995
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
JAYARK CORPORATION
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Registrant
/s/ David L. Koffman September 14, 1995
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David L. Koffman, President
Chief Executive Officer
/s/ Clay Whitehead September 14, 1995
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Clay Whitehead, Controller,
Chief Financial Officer
Exhibit 11
JAYARK CORPORATION AND SUBSIDIARIES
EARNINGS PER SHARE COMPUTATIONS
July 31,
1995 1994
GIVEN:
Weighted Average Shares 7,641,842 6,614,079
Income (Loss) From Continuing Operations $(558,000) 1,000
Income From Discontinued Operations - 8,000
Net Income $ (558,000) 9,000
Dividends $ - $ -
Average Closing Bid $ 1.1692 0.6240
Closing Bid Price $ 1.1250 0.7500
Dilutive Option Price $ 1.1692 0.7500
DILUTIVE SECURITIES:
Shares:
Subordinated Debentures $ 1,500,000 1,800,000
$1.50 Conversion Price $ 1.50 $ 1.50
Net Convertible Shares 1,000,000 1,200,000
INTEREST EXPENSE:
Subordinated Debentures $ 1,500,000 1,800,000
12% Semi Annual 180,000 216,000
Weighted Average 45,378 54,454
Net of 34% Tax $ 29,949 35,939
STOCK OPTIONS (Prime):
Number Employee Stock Options 367,500 467,500
Multiplied by the Option Price $ 0.48 $ 0.47
$ 176,106 219,819
Divided By The Average Market Bid $ 1.1692 0.6240
Yields Required Shares 150,621 352,273
Net Additional Shares 216,879 115,227
CALCULATION (PRIME):
Income From Continuing Operations (558,000) 1,000
Loss From Discontinued Operations - 8,000
Net Income (558,000) 9,000
Divided By:
Average Outstanding Shares 7,641,842 6,614,079
Stock Options 216,879 -
Total 7,858,721 6,614,079
EARNINGS PER COMMON SHARE
From Continuing Operations $ (0.07) -
From Discontinued Operations - -
Net Income $ (0.07) -
CALCULATION (FULLY DILUTIVE)
Income From Continuing Operations (558,000) 1,000
Plus Interest Savings 29,949 35,939
Loss From Discontinued Operations - 8,000
Net Income (528,051) 44,939
Divided By:
Average Outstanding Shares 7,641,842 6,614,079
Convertible Shares 1,000,000 1,200,000
Stock Options 216,879 174,409
Total 8,858,721 7,988,488
EARNINGS PER COMMON SHARE FULLY DILUTED
From Continuing Operations $ (0.06) -
From Discontinued Operations - -
Net Income $ (0.06) $ -
